KINGFISHER AIRLINES CRISIS

PRESENTED TO: Mrs. Barkha Pathak Ms. Ushma Desai PREPARED BY: Arora Srishti (04) Shah Bhoomika (11) Mali Divyesh (50) Maskara Nikita (53) Modi Ishita (59)

HISTORY

Industry: Transportation.

Founded: 2003
Operation started: 9 May 2005 Headquarters: The Qube, Mumbai, Maharashtra Key People: Dr. Vijay Mallya (CMD) Sanjay Aggarwal (CEO) Hitesh Patel (EVP)

BRIEF ABOUT KINGFISHER AIRLINES

Kingfisher Airlines established in 2003. Parent Company: United Breweries Group. Headquarters: The Qube, Mumbai, Maharashtra The airline started commercial operations from 9 May 2005.

It started its international operations on 3

September 2008 by starting a flight from Bengaluru to London.

HOW PROBLEMS STARTED AT KINGFISHER AIRLINES

Ever since the airline commenced operations in 2005, the company is reporting the losses.

Situation became more horrible after acquiring

the Air Deccan in 2007, the company suffered a

loss of over Rs. 1,000 crore for three executive

years.

TACKLING THE CRISIS

DEBT-RESTRUCTURING In November 2010, the company adopted the way of debt restructuring and under that total 18 leading lenders, those have landed total Rs. 8,000 crores, agreed to cut interest rates and convert part of loans to equity. Debt-restructuring also couldnt change the game. By restructuring, company had reduced the interest charges by Rs. 500 crores every year, but due to the high leverage condition and increase in cost, the company started to face the liquidity problem.

CONSEQUENCES

DELAYED SALARY
Kingfisher Airlines delayed salaries of its

employees in August 2011, and for four months in succession from October 2011 to January 2012.

FUEL DUES
Due non-payment, several Kingfisher's vendors

CONSEQUENCES CONT

AIRCRAFT LEASE RENTAL DUES

Due to that, the Kingfisher Airlines has grounded 15 out of 66 aircraft in its fleet as it was unable to

meet the maintenance and overhaul expenses.

AAI REPORTS
Kingfisher received a notice from the Airports
Authority of India on February 2012 regarding accumulated dues of 255.06 crore.

SERVICE TAX
On 10th Jan 2012, Kingfisher Airlines has service tax arrears of 70 crore.

BANK ARREARS
Kingfisher Airlines had not paid some bankers (Lenders) as per the Debt Recast Package(DRP) with lending

banks. Till the end of Dec 2011,the arrears were

estimated to be 260 crore to 280 crore.

THE CRISIS CONT

During late February, 2012, Kingfisher Airlines started to sink into a fresh crisis.

Several flights were cancelled and aircraft were

grounded.

The airline shut down most international short-haul operations and also temporarily closed bookings.

Out of the 64 aircraft, only 22 were known to be operational by February 20.

THE CRISIS CONT

Kingfisher's market share clearly dropped to 11.3%.

By February 27, Kingfisher operated only above 150 out of its 400 flights and only 28 aircraft were functional.

OTHER FACTORS

Faulty business modal KFA

Improper handling of Financials by the

company's management

Acquisition of Air Deccan by Kingfisher Vijay Mallya's over enthusiasm killed

Kingfisher Airlines

The Employees opposition

The engineers refused to certify aircraft till they were salaries. The airline failed to pay May salaries till its deadline. Kingfisher Airlines employees prosecuted promoter Vijay Mallya.

Comparison with other playersCorrelating with reasons of failure

High operational cost High fuel prices Many unprofitable routes More turnaround time

MEASURES TAKEN DURING CRISIS

KEY REVENUE INITIATIVES

KEY COST REDUCTION INITIATIVES:

CAPITAL RECAST

SUGGESTIONS TO KFA

Remove the flights from low frequency routes. Try to bring down the cost-per-flight if an airport services more number of flights. Improve revenue per passenger. Avoid aggressive expansion of fleets. Avoid full-course meals, give snacks. Try to focus on smaller aircrafts (50-70 seaters) and full efficient planes for short distance. For a long term strategy, internationally focus should remain one region at time.

SUGGESTIONS TO KFA CONTINUE

Meet the expectations of customers so that they continues to patronize its products and services and also encourage others to do the same. Keep it worthwhile for the suppliers of the necessary resources to continue to do business with the organization. Meet the aspiration of its employees so that they were motivated to contribute to the organization and also help attract and retain the necessary talent for future growth. Comply with expectation of the society/community both in terms of legal compliance as well as a good corporate citizen.

BIBLIOGRAPHY

http://www.flykingfisher.com/media http://timesofindia.indiatimes.com/india/Kingfis her.../12258986.cms http://articles.economictimes.indiatimes.com http://www.livemint.com http://www.thehindubusinessline.com